The largest force-placed insurance company in Massachusetts has agreed to provide refunds to homeowners to settle allegations that it improperly charged for force-placed insurance policies, Massachusetts Attorney General Maura Healey announced.
Under the terms of the assurance of discontinuance, filed Monday in Suffolk Superior Court in Boston, American Security Insurance Company, a subsidiary of Assurant Inc., will refund premiums to thousands of Massachusetts homeowners who were allegedly required to purchase unnecessary or overpriced force-placed insurance policies.
“We will not allow consumers to be overcharged for insurance products they do not need and will continue to seek accountability from mortgage servicers and their business partners, including force-placed insurance carriers,” Healey said. “Force-placed insurance is only necessary when a borrower fails to maintain a homeowner’s insurance policy. This agreement ensures that affected consumers receive the restitution they deserve.”
The settlement provides full refunds for the periods of duplicative insurance coverage for any person who had acceptable homeowners insurance at the same time he or she was force-placed by a mortgage servicer.
The settlement also requires refunds for policyholders who were overcharged for force-placed insurance policies because they were mistakenly sold commercial policies rather than less expensive residential policies.
The attorney general’s office said it will conduct an audit to identify eligible Massachusetts homeowners. To date, the attorney general has identified thousands of potentially improper charges that could result in millions of dollars in relief to Massachusetts homeowners.
Aside from amounts identified in the audit, the agreement also requires Assurant to pay $565,000 to the state.
Force-placed insurance is homeowners insurance that a lender or mortgage servicer obtains on behalf of a homeowner if it is believed that the homeowner does not have adequate insurance of his or her own. Premiums for these policies are high, often as much as two- or three-times as expensive as voluntary insurance, and the coverage provided is limited, the attorney general’s office said.
Mortgage servicers often rely on force-placed insurance companies, like Assurant, to monitor whether borrowers have maintained appropriate insurance coverage. When a borrower is believed to have failed to maintain appropriate coverage, the insurer issues a force-placed insurance policy and the mortgage servicer charges the premium for the policy to the borrower.
The attorney general’s office said it continues to review force-placed insurance practices. The attorney general encourages consumers who have complaints or disputes relating to force-placed insurance or their mortgage to file a complaint with the attorney general’s office.
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